Revista Tinerilor Economiti
POSITIONING STRATEGIES OF RETAILERS
Assist. Lect. Dan Cristian Dabija, PhD Student
Assist. Lect. Ioana Nicoleta Abrudan, PhD Student
Babe-Bolyai University
Faculty of Economics and Business Administration
Cluj-Napoca, Romania
Abstract: As any other manufacturer, retailers must also position
themselves on the market in order to be accordingly perceived by
consumers. Either by differentiation through costs or by focusing on
quality, retailers adopt a specific marketing approach for developing
consumers` loyalty in the target segments. Thus, the analysis is even more
interesting, because retailers usually have not only different store formats,
but also private labels (store brands) by that they aim at achieving their
purpose.
Key words: retailer, strategy, positioning
1. Different Strategic Approaches of Retailers
Strategy can be regarded in a wider sense as representing “the goals, principles
and strategies (in a narrow sense)” pursued by a company and in a stricter sense as “the
activities which contribute to the fulfillment of the company’s goals” (Hofer, Schendel,
1978, p.25). In this way, they are the “fundamental instruments” for fulfilling the
mentioned purposes. Enterprises usually operate with various strategies, depending on
the company’s hierarchical level of decision. Thus, we may distinguish (Liebmann,
Zentes, 2001, p.167):
x Basic strategies (company’s general strategies) which aim at the field of the
company’s activities, their “width, depth and geographic extension”, but especially
at the way it can enter a market;
x The strategies of the Strategic Business Units refer to the possibilities to realize
“the aims of a SBU – Strategic Business Unit”;
x Functional strategies – refer to the existing departments within a company,
whilst their goal is “to develop and utilize the resources of a SBU”.
Table 1. The three levels of strategies in a company (Liebmann et all, 2008, p.138)
I. Basic strategies of a company
Strategies of the type product / markets
Specialization or diversification
Internationalization
Vertical integration
Penetration strategies
Development or acquisition
Property
Temporal penetration
II. Strategies of the Business Unit
Competitive strategies
Costs
Differentiation
Concentration
Development strategies of the Business Unit
Development of market share
Consolidation
Pull-out
III. Functional strategies
Personnel
Buying
Marketing
Financial
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As a part of the hierarchical structure of a company, a “Business Unit”
comprises several “strategic segments of business”, which are, in turn, divided into
these SBUs – “strategic business units” (Welge, Al-Laham, 2001, p.325).
The strategic business unit (understood as a matrix combination of the
“product/market” type) has a usually clearly defined role in the target market, being
oriented towards solving certain specific problems of the enterprise. Meanwhile, it is
characterized by individuality in planning and in achieving the activities of which one
assumes that they contribute to the market success. During this time, the “strategic
business unit” comprises several “product / market combinations”, as homogenous as
possible, and with a similarity in market positioning, strategic planning and contribution
to the success of the company (Welge, Al-Laham, 2001, p.325).
Company
Business Unit
Strategic Business Segment
Strategic Business Segment
SBU
SBU
SBU
SBU
SBU
SBU
Business Unit
Strategic Business Segment
Strategic Business Segment
SBU
SBU
SBU
SBU
SBU
SBU
Figure 1. Conceptual Delimitation among BU, SBA and SBU (Welge, Al-Laham,
2001, p.325)
The origin of strategies loses itself in history; proofs of their success in the long
run.
Some
strategies
have
been
used
by
war
waging
parties.
(www.de.wikipedia.org/wiki/Strategie) 13.
Table 2. The 5 „P” Approach of Strategies (Mintzberg, Quinn, 1998, p.10)
Behaviour
Description
Type
13
Plan
Plans which
describe explicit
and ex ante
activities and which
coordinate future
activities and
decisions of the
company
Ex–ante
Ploy
Manoeuvre in
order to fool
the
competitors
Dynamic and
temporary
Strategy as
Pattern
Result of
incremental and
uncoordinated
decisions, but
also of
unpredictable
events
Not planned
Position
Strategic
positioning of
the company in
its environment
Perspective
Internali-sation
of the
company’s
own orientation
Interdependen
ces towards
the
environment
Own
Filip and Alexandru of Macedonia, Sun Tzu, Machiavelli, Napoleon, von Clausewitz,
Montgomery or Mao Tse-Tung are considered the great thinkers of strategic concepts
development in military and diplomatic art
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2. The Concept of Competitive Strategy in Retailing
“Competitive strategies” are “those strategies on SBU level, whose goal is to
create and protect competitive advantages” (Zentes, Swoboda, 2001, pp.590-591)
related to the “environment” where the company acts, to “competitors, suppliers,
distributors” and other entities with the aim of “creating” and strengthening „the
position in the branch”, and of “achieving a higher level of revenue for the invested
capital” (Liebmann, Zentes, 2001, p.172). Here it is imperative to distinguish
conceptually, what Porter underlined as well (Porter, 1997, p.26), between these
strategies and the company’s general ones (“corporate strategies”) (Zentes, Swoboda,
2001, p.590).
In fact, a company’s competitive advantage is nothing but a “superior service
delivery” (Liebmann, Zentes, 2001, p.173) in comparison with that of competitors, who
“must refer to a characteristic that is important for the customer”, “must be perceived as
such by him” and “must have a certain durability, meaning that it cannot be easily or
soon copied by competitors” (Simon, 1988, p.465).
In other words the understanding of “competitive advantage” is done by two
inseparable perspectives (Liebmann, Zentes, 2001, p.173):
- That of the competitors – in order to recognize the competitive advantages,
but mostly in order to adequately exploit them, the company continuously
carries out SWOT analyses of its own market position compared with that of
its competitors (Pop, 2000, p.136).
- That of the customer – he becomes thus the “referee” who decides which of
the service deliveries (of the company or of its competitors) are valuable for
him (in sense of domination) (Gröppel-Klein, 1998, p.21).
For the present approach, the relevance derives on the one hand from the fact
that, overall, retail in itself faces the challenge to differentiate from producers, meaning
that it has to succeed in providing the customer, through its own items and through its
services, that value he expects, in similar conditions of quality and price. On the other
hand, retailers, or retail units are those that “fight” to attract as many consumers as
possible and implicit to increase their market share.
2.1. Typology of Competitive Strategies in Retailing
In order to grasp the dimensions of strategies as accurately as possible or just to
regard a certain activity, literature (Liebmann, Zentes, 2001, pp.175-188) recommends
a “systematization”, somehow special methods for retail (Haves, Crittenden, 1984,
pp.275-287).
2.1.1. Competitive Strategies after Porter
For retail, the strategies defined by Porter are only relevant due to their focus
on “low costs” or “differentiation” (Porter, 1980). In his opinion, only those enterprises
which simultaneously rally on the two dimensions, may be successful, the failure of one
bringing the company to a relatively dangerous situation of the “stuck in the middle”
type, which is a “middle” competitive position, which cannot be successful on the long
term (Liebmann, Zentes, 2001, p.175). This determines the competitive focus of the
company, which can address to the whole market, or just to a niche (Pop, 2000, p.198),
the potential combinations being revealed in the next figure.
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Strategic objective
Strategic advantage
On the level
of the
industry
Limitation at
a single
segment
Singularity from the
buyers’ perspective
Advantages through
costs
Differentiation
(Kaufhof, Karstadt)
Management by costs
(Kaufland, Carrefour)
Concentration on essential aspects (Aldi, Lidl,
specialized retailers)
Figure no. 2. Typology of competitive strategies after Porter (Porter, 1999, p.67)
By differentiation strategy (also called “the strategy of supremacy through
service delivery or quality”), the enterprise intends to develop a competitive advantage
of its own services in order to adequately position itself among the various “tastes” or
“preferences” of consumers. A path that might be followed is to “increase the utility of
the offer”, a desire that might be achieved by improving the quality of the products,
enlarging the assortment, by a better or faster service, a more pleasant ambiance in the
retail unit or even a smiling staff. According to Porter’s thesis, additional costs caused
by differentiation could be covered by the slightly higher level of prices of the
respective retail units (Liebmann, Zentes, 2001, p.175).
Meanwhile, if the retail unit chooses to focus on costs, then it will try to
become “the most advantageous provider in that sector”. But, in order to achieve this
goal, it will have to “rationalize most of the activities in its value chain”, to “gain a
significant market share”, and to “standardize” the processes within the company
(Liebmann, Zentes, 2001, p.176).
The third type of strategy requires the approach of only a part of the total
market and, implicitly, the offer of an incomplete assortment. The development of
competitive advantages is achieved by differentiation and costs, the focus of resources
on only one segment possibly leads to a dominant or exclusive position. On the one
hand, this is the discounters’ concept, who, by their profile distinguish themselves from
other competitors (“fast circulation of goods”, “narrow assortment”, “lack of service”)
and which underlines a strong focus on products’ prices, and on the other hand, that of
“specialized retailers” (Liebmann, Zentes, 2001, p.176).
2.1.2. Competitive Strategies according to Miles / Snow
Competitive strategies are based on the differentiation according to the specific
behavior of four types of possible strategies. No matter what type of strategy is adopted,
(“defender”, “analyzer”, “prospector”, “reactor”) and how they are realized
(“corporate”, SBU) they must respond to three essential questions (Liebmann, Zentes,
2001, p.181):
- entrepreneurial – „what products/ markets combinations are covered?”
- technological – „what kind of systems or technologies must be utilized?”
- administrative – „how should the activity be structured?”
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Defender
Analyser
Prospector
Market coverage and risk inclination
Orientation towards innovation
Flexibility and decentralisation
Reactor
Figure 3. Central elements of the competitive strategies approach after Miles/Snow
(Miles, Snow, 1978, p.112)
The four types of strategies defined by Miles and Snow have received
numerous confirmations by empirical studies; for retail, the most relevant study
underlining the characteristics presented in the following table.
Characteristics of the strategies
Definition
Type
Table 3. Determinant factors of strategic activities (Liebmann, Zentes, Swoboda,
2008, p.85; Moore, 2005, pp.696-704)
Prospector
- Aggressive behavior in
defining new markets,
technologies and process
and decentralized
organizational systems;
innovative policy in defining
the approached markets;
active search of new
development opportunities
- Innovative leader in retail
trade
- Usually moves into new
markets
- Renown as the “first” to
introduce new trends in retail
(imposes new behaviors)
- Profit (turnover) risking with
the aim of developing new
retail units does not affect him
Strategy
Defender
Analyzer
Reactor
- Indefinite
- Defensive behavior of the - Hybrid adaptation
market position held that behavior, typical for
behavior;
is also specific for niches; both “prospective” and “adaptation”
organizational structures; “defensive” strategy
reaction to
stable decisions
market, without
following a certain
pattern
- Maintains a sure niche, using a traditional type of
retail unit
- Stubborn in maintaining the present format of retail
unit
- Focuses on improving the present distribution way
instead of innovating
- Adopts only those innovations with a direct impact on
his business
- Adopts industrial innovations after a longer period of
time
- Focuses mainly on serving present customers and
only secondarily on attracting new ones
- Takes advantage
of market
conjunctures
- High risk takers
- Leader in developing new
forms of retail
- Continuously adopts new
technologies
2.2. Competitive Behavior of Retailing Units
In literature retailer shows a “competitive behavior” when he succeeds in
realizing a “competitive strategy”, with respect to any decision regarding the market
approach. The success of a strategy depends on how “competent it is”, but also on the
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existing competitors, which is to say how “attractive the market is from the competitors
point of view” (Liebmann, Zentes, Swoboda, 2008, p.89).
Depending on the level of competition, it can be distinguished between an
“active” behavior (possible positions of retailers are cooperation, conflict, adaptation or
avoidance) and a „passive” one (in case of a dominant or monopoly position, but also in
case of ignoring competitors) (Meffert, 1994, p.155). The “market position of the
enterprise” (strong, medium or low) plays an important role when adopting one of the
two types of behavior. It also depends on the resources found at his disposal (Tietz,
1993, p.805).
3. The Concept of Positioning Strategies in Retailing
Thus, positioning can be defined as “the concept which delimits the
characteristics of competitive objects by stressing the demand (target segments) with
the aim of achieving competitive advantages” (Liebmann, Zentes, Swoboda, 2008,
p.146).
This means “the retail unit actively and strategically develops a position on the
relevant market” (Tietz, 1993, p.124). In this regard, the object of positioning in
retailing is not “the products, but the retail units with their array of services and
commodities”. Therefore, it must not be talked of “positioning through products” of
retailer X or Y, but of “image” (Liebmann, Zentes, Swoboda, 2008, p.149), “store
ambiance which conveys a spirit of adventure” (Weinberg, 1986, pp.97-102), “success
factors of stationary retailing” (Patt, 1990, pp.24-44) or “instruments and chances of
conveying an adventure mood” (Gröppel, 1991, pp.10-15).
In fact, positioning implies developing an “identity of the retail unit” 14 in the
spirit of “an individual promise of service delivery, which leads to retailer’s
highlighting in consumers’ minds and to his getting ahead of the other competitors”.
Usually, the positioning of a retailer is based on three central elements (Liebmann,
Zentes, Swoboda, 2008, p.149):
x “Location” – the agglomeration of retail units in a specific location can be the cause
of an increase of their sales;
x “Image” – here one observes a transfer of image between from a retailer to the
whole retail sector;
x “Competition”:
- Between sectors – characterized by the fact that several retailers aim at the same
target segment beyond sectors (a shop selling leather goods will compete with the
leather department of a hypermarket or the retail store of a certain producer of leather
goods);
- Within sectors – represented by the competition among several units of the same type
(supermarkets, hypermarkets, etc). The actual positioning may occur through
assortment, price, marketing mix instruments or a combination of them, etc.
4. Various Approaches of the Positioning Strategies in Retailing
Departing from the strategies defined by Porter, some authors have further
developed his model and succeeded in empirical tests. Therefore, Meffert (Meffert,
1985, pp.20-28) has succeeded in classifying retailing units on the one hand according
14
reference literature calls this concept as „Einkaufsstätte“ (German), „Point of Sale“
(PoS), „Shopping place“ or even „Retailing outlet“
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Revista Tinerilor Economiti
to the market segment they approach, and, on the other hand, according to the
advantage provided by costs or services.
Entire
market
Commercial centre
General
store
Hypermarket
Self-service
universal unit
Specialised
store
Specialised
discounter
DIY store
Part of the
market
Advantage through
services
Advantage through
costs
Figure 4. Positioning of various retailing units (Meffert, 1985, pp.20-28)
Another strategic approach is the one described by Ahlert and Schröder (Ahlert,
Schröder, 1990, pp.221-229), who classify the possible strategies followed by retailers
depending on the dimensions: adventure versus service, price versus quality, thus
identifying several strategies (Liebmann, Zentes, Swoboda, 2008, p.151):
a. discounters’ strategy – characterized by an “aggressive price policy” under the
circumstances of a relatively “narrow” assortment of goods;
b. adventure strategy – oriented towards satisfying the “adventure value” of
“wealthy customers”;
c. mixed strategy – type 1 (“supplying – quality”) – where “supplying of goods”
is the central element, even though some “extra quality services” are provided;
d. mixed strategy – type 2 (“adventure-discount”) – includes commodities offered
at “low prices”, but which induce a strong feeling of adventure.
Adventure oriented
competition
Mixed strategy
type 2
Adventure
strategy
„The
golden
middle”
Competition
by price
Competition
by quality
Mixed strategy
type 1
Discount
strategy
Buying oriented
competition
Figure 5. Competitive positioning strategies (Ahlert, Schröder, 1990, pp.221-229)
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In order to efficiently position themselves, retailers must first identify the
relevant “positioning dimensions”, and afterwards they must develop “competitive
relationships”, based on a “theoretical and spatial model of market positioning” (Theis,
1992, p.54).
F
H
Segment 1
C
B
A
E
Segment 2
D
G
I
Consumer's behaviour (ideal positioning)
Retailer's competitive position (real positioning)
Figure 6. Possible bi-dimensional positioning (Theis, 1992, p.33)
Such a model must take into account consumers’ perceptions towards some of
the selected attributes of retailers. According to them, “image profiles” of the units are
done, trying to underline as exact as possible the “expectations” and “necessities” of
consumers (Liebmann, Zentes, Swoboda, 2008, pp.153-154).
Furthermore, the profile of retailers or their competitive position is determined,
according to the above mentioned coordinates. Finally the real distance between the
actual state of the retailer (competitive position) and the ideal one (given by consumers’
perceptions) is calculated. In fact, the maximum “acceptance and preference” among
the target segment is achieved only when the distance between the two states is a
minimum. In the long run, the retailer has several strategic alternatives in order to
minimize the distance or to adopt potential strategies (Liebmann et all, 2008, p.154):
x “adaptation” to consumers’ perceptions;
x “influence” of consumers’ perceptions in order to bring it to retailer’s desired level.
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Revista Tinerilor Economiti
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***
www.de.wikipedia.org/wiki/Strategie
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